People Search Digest

The biggest news in Silicon Valley as of late has concerned Microsoft’s failed attempt to acquire the ailing Yahoo Inc. to the tune of $44.6 billion (roughly $33 a share to Yahoo’s $19 a share worth). Though the original aim of the deal was to create a viable unit that could compete with reigning search king Google, Yahoo CEO Jerry Yang rejected the offer on the grounds that his company was worth more than Microsoft was prepared to offer.

The plot thickened dramatically on Thursday morning when billionaire investor Carl Icahn sent a nasty letter to Yahoo accusing the company of acting “recklessly” and “irrationally” when negotiating with Microsoft. Icahn, who quickly and quietly amassed 50 million in Yahoo stocks over the past week, claims that Yahoo in essence acted without regards to its stockholders when making the decision. Icahn writes:

“It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.”

Adding a juicy shot of corporate drama to the mix, Icahn proposes bringing in a dissenting board of directors (including venture capitalist Adam Dell, brother of Michael Dell, of Dell computer fame) that would most likely oust Yang from the company he founded 11 years ago with partner David Filo and reopen negotiations with Microsoft, in essence forcing a merger between the two companies to happen. If Yahoo was a small island country, this would be its glorious revolution and it’s entirely possible that heads could start rolling in Silicon Valley should Icahn have his way.

There are some problems, though. Though Icahn seems sure of the financial wisdom of his position, it is predicated upon the belief that Microsoft is still, after everything, interested in purchasing Yahoo. Rebuffed Microsoft CEO Steve Ballmer has reportedly “moved on” from the deal, according to a source. Rumors also abound that a cuckolded Microsoft has been none-too-pleased with Yahoo’s growing chumminess with MSN competitor Google. It is also worth pointing out that Yahoo’s stock price dropped after their sour dealings with Microsoft, making it unlikely that Microsoft will amiably pony up the same amount of cash for less valuable stocks. Perhaps the only real winner in this mess is Google, which has let it’s two main competitors fight amongst themselves while quietly building the foundation for a monopoly even Microsoft should fear.